R&D Spillovers and the Case for Industrial Policy in an Open Economy

Dermot Leahy and J. Peter Neary

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: In this paper we consider the case for subsidies towards firms which generate R&D spillovers in open economies. We show that many expected results are overturned in the presence of strategic behaviour by firms. Local R&D spillovers to other domestic firms may justify an R&D tax rather than a subsidy; R&D cooperation by local firms over-internalises the externality and also justifies an R&D tax; and international spillovers which benefit foreign firms may justify a subsidy, even though the government cares only about the profits of home firms.

Date: 1997-04
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Related works:
Journal Article: R&D Spillovers and the Case for Industrial Policy in an Open Economy (1999)
Working Paper: R&D Spillovers and the Case for Industrial Policy in an Open Economy (1997)
Working Paper: R&D spillovers and the case for industrial policy in an open economy (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0345

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